Worst idea ever: Sprint in talks to buy T-Mobile

March 8, 2011 7:53 AM
Devindra Hardawar
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Deutsche Telekom is apparently in talks with Sprint to sell its T-Mobile USA division, sources in the know tell Bloomberg.

The companies are supposedly far from finalizing a deal after on and off talks. The biggest roadblock, according to the sources, is Sprint and Deutsche Telekom’s inability to agree on T-Mobile’s valuation after it saw a major drop in profit and subscribers last quarter. If a deal is reached, Deutsche Telekom will land a major stake in the combined company.

Deutsche Telekom vaguely confirmed the fact that it’s looking to sell off T-Mobile in an email statement to Bloomberg, saying that it may sell off all or part of the company. The company didn’t mention who it was looking to sell its T-Mobile business to. A Sprint representative declined to comment to Bloomberg, and we’re still awaiting an answer to our inquiries.

It’s becoming increasingly difficult for both Sprint and T-Mobile — the third- and fourth-largest carriers in the US, respectively — to compete with AT&T and Verizon. Those companies have much larger network footprints, and as of February they also both offer Apple’s iPhone. By joining forces, Sprint and T-Mobile might find it easier to fend off competition.

But while it sounds good on paper, in practice a union between the companies would likely result in disaster. Sprint and T-Mobile’s 3G networks are completely incompatible, and at the moment the companies are also pursuing completely different 4G strategies. T-Mobile is focusing on expanding its 3G network with HSPA+ technology, while Sprint is counting on its majority stake in Clearwire to deliver WiMAX 4G. Having the separate networks coexist under a single company sounds like a major headache, and it would be years before Sprint and T-Mobile subscribers could coexist on the same network.

Instead of a union between the companies, T-Mobile may consider buying wireless spectrum from Clearwire, two sources say. That would allow T-Mobile to either expand its network to regions where it doesn’t have full coverage, or strengthen it in metropolitan areas where it has to compete with other carriers.

  • Crowd_Sorcerer

    So the phone cartel of 4 then becomes a phone cartel of 3.

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